Tricolor opens 9th reconditioning facility to meet demand

Tricolor Auto Acceptance this week opened the company’s first stand-alone reconditioning facility as demand for used vehicles and auto loans for thin-file borrowers continues to outpace capacity. The Dallas-based lender leverages machine learning and artificial intelligence to serve thin- and no-file Hispanic consumers. As demand for auto financing for lower income population grows, Tricolor has expanded into five states covering 20 markets and operates 55 retail hubs, Chief Executive Daniel Chu told Auto Finance News , noting Tricolor operates in Western states along the U.S.-Mexican border and in Las Vegas. Tricolor’s origination volume has also more than doubled over the past two years and is on track to land at about $750 million by yearend, Chu said, noting the growth is largely due to the company's geographic expansion and surging same-store vehicle sales, which increased 70% during the same two-year period. The lender’s application volume, too, has jumped 120% year over year for the past two consecutive years, he said. “Our demand is exceeding our actual growth,” Chu said, noting that while Hispanic consumers drive much of the U.S.’ economic growth, they cannot easily transition to remote work. “They require transportation for survival, and their inability to access affordable credit presents them with challenges to purchase reliable transportation.” Expanding footprint Tricolor now runs a total of nine reconditioning centers, with the other eight housed in retail locations across the company’s footprint, including in Dallas, Fort Worth, Houston and San Antonio in Texas, and four locations in California, Chu said. The company plans to open another stand-alone, large-scale facility on the West Coast by mid-2023, he added. The latest 200,000-square-foot reconditioning facility is based in Wilmer, Texas, about 15 miles south of downtown Dallas, and accommodates 200 service bays along with a full paint and body center and an automated car wash, according to a company release. The center employs more than 200 people and will allow Tricolor to perform 150-point inspections on used vehicles for customers and invest, on average, $2,200 per vehicle. [caption id="attachment_57330700" align="alignnone" width="3024"] Courtesy of Tricolor [/caption] “This infrastructure is very necessary for us to support our scale,” Chu said, noting that controlling the quality of the underlying collateral is essential to serving low-income borrowers. Tricolor also provides a free, limited warranty for up to 18 months or 18,000 miles that covers all major components of the vehicle, he said. “In the event of a major mechanical issue, the low-income consumer is not prepared to be able to deal with that,” Chu said. “We want to provide that consumer with a vehicle that is superior to anything else they can possibly access with respect to mechanical condition and safety. This reconditioning center allows us to ensure high quality at scale.” Meanwhile, Tricolor Auto Acceptance continues to be active in the capital markets. In May, the lender issued its first-ever asset-backed securities (ABS) social bond , a $212 million transaction backed by auto loans for thin- and no-file borrowers. Tricolor has completed eight ABS deals since its first securitization in July 2013, according to the release. The lender has, to date, funded more than $2 billion in auto loans for thin-file Hispanic consumers. Auto Finance Summit, the premier industry event for auto lending and leasing, returns October 26-28 at the Wynn Las Vegas. To learn more about the 2022 event and register, visit www.AutoFinanceSummit.com .

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